DURBAN – Grand Parade Investments (GPI) has sold Burger King South Africa (BKSA) and Grand Foods Meat Plant (GFMP) to Emerging Capital Partners (ECP) for less than it initially wanted as a result of the Covid-19 pandemic.
GPI said on Wednesday that it had to reconsider its asking price after the transaction was nearly scuppered by the pandemic.
GPI said that it accepted a revised offer of R570million for BKSA and R23m for GFMP.
GPI had initially agreed to sell both entities for R670m for BKSA and GFMP for R27m when the two parties negotiated in February.
Chief executive Mohsin Tajbhai said the pandemic hit the group’s earnings more than 250percent during the year to end June.
He said the decline of its profits necessitated the review of the planned transaction.
“The deal has been negotiated on a cash basis with no earnings warranty,” Tajbhai said. “Management is in the process of negotiating a share purchase agreement after which a circular detailing terms of the BKSA sale will be released and a general meeting of GPI shareholders convened to approve the transaction.”
Tajbhai said the group realised that BKSA was not going to achieve last year’s earnings before interest, tax, depreciation and amortisation (Ebitda) of R54m last year.
GPI’s profits fell 262percent to a loss of R61.7m compared with a R38m profit last year.
BKSA reported an Ebitda of R26.85m as a result of closure of food outlets during the lockdown.
Tajbhai said that GPI was also impacted by a sharp decline in both the foods and gaming businesses as well as the prospective application of IFRS 16.
He said the group’s revenue fell 6.9percent to R1.31billion and it reported a headline loss of 14.44cents a share compared with headline earnings per share (Heps) of 8.91c while basic loss widened to 28.93c compared with last year’s loss of 8.48c.
Tajbhai said this has been a year of two halves as in the first half GPI delivered a strong set of results with all major financial metrics improving on the prior year.
“The second half of the year was dominated by the negative impact of the Covid-19 pandemic and related lockdown restrictions. The resultant halting of operations eroded all the gains achieved in the first half,” he said, adding that despite the setbacks, GPI made good progress on their strategy to unlock value and to remain focused on delivering value to their shareholders through the controlled sale of assets.
“The sale of BKSA is the first step in the plan and represents over R1 a share in value for shareholders. We are confident in closing the BKSA and GFMP transactions and will continue to investigate ways of maximising value through our gaming investments. The successful implementation of the strategy will unlock in the region of 50percent in value based on the current share price which represents an attractive return for shareholders,” Tajbhai said.
GPI rose 2.94percent on the JSE yesterday to close at R2.10.